Of Piracy, iTunes & Variable Pricing

Often I get into arguments with my associates (and sometimes friends) regarding piracy of music and related stuff. Frankly, there is nothing to argue. But, it’s ok to entertain the stupid comments made by them. Ignorance is not always bliss. You should hear them.

For starters, I am someone who respected the intellectual property, effort and passion of recording artists even before I joined the Recording Industry in 2003. So, its not the Industry that made me change my mind, but the very fact that I believe that one has no right to something that he/she does not own.

Basically, my counterparts are who ‘we’ refer to as the ‘Lost’ generation. Nope. I’m not referring to the popular drama series. I’m referring to the product spawned by napster, kazaa and industry slackness. This is the generation that will never pay for music. They believe that music is meant to be free. I once spoke to a ‘self confessed live-for-the-music’ woman who told me that the proliferation of pirated music on the internet is what artists want!! You know, you just have to hand it to these people.

Recently, Red Hot Chili Peppers lashed out at a music pirate who leaked the funk-rock band's upcoming album ‘Stadium Arcadium’ onto the Internet, and urged fans not to download it illegally. The band's bass player, Michael "Flea" Balzary, said he and his colleagues would be heartbroken if fans downloaded the album. "For people to just steal a poor sound quality version of it for free because some asshole stole it and put it on the internet is sad to me," he said. "I can not put in words how much this record, 'Stadium Arcadium,' means to us, how sacred the sound of it is to us, and how many sleepless nights and hardworking days we all had thinking about how to make it be the best sounding thing we could and now, for someone to take it and put it out there with this poor sound quality it is a painful pill for us to swallow," Balzary added.

So much for the theory that artists want their music to be heard by as many people possible.

My two words to the intelligent lady mentioned earlier: Fuck You

Okay, so the lost generation wants free music. They also condemn the record industry for everything they can think about; including unavailability of digital music (they probably haven’t heard of iTunes or Soundbuzz… more reasons why I think they are truly lost!!). They think the music companies make too much money anyway – that they squeeze the last dollar out of the customer and artist as well. So, a little bit of downloading from the internet or file sharing should not affect them right?

To them and to others who may be interested… what value does a music company actually add to the process? To the business – that’s what it is. A business.

Music companies have two areas where they add value. One is the editorial side of the business: finding and nurturing talent. The second is the marketing of those artists, bringing them through a massive number of different channels and promoting their music.

Both these activities cost a bit of money. And that’s where the profits (if any) are being pumped into.

Something else that I was hoping would not happen…

On May 2, Apple won the pricing battle against the four largest record companies (Universal, SONY BMG, EMI & Warner) in a behind-the-scenes battle to charge different prices for songs on iTunes.

So, downloads remain at 99 cents.

Apple Computer said that it has renewed contracts with the record companies, ensuring that songs will still be sold at 99 cents each. The record companies had been pushing Apple to allow different pricing for tracks, especially the ability to charge higher prices for new material from top-selling artists.

The companies were forced to accept Apple CEO Steve Jobs' pricing because the iTunes music store has so much influence over the U.S. download market. The iTunes music store accounts for 80 percent of paid downloads.

(Some labels were considering signing short-term contracts with Apple now and then bringing up the issue again in the near future.) Online music sales increased 194 percent last year to 352 million units, according to the report.

So did Steve (holier than thou) Jobs arm-twist the music companies into accepting this structure? Does he really think that the digital music market is too young to risk alienating people with higher prices? (True, people have started paying for downloads... but are they as price conscious as he thinks they are?) He has a supporter in Jimmy Iovine (The man with a plan!! One of my gurus, more about him in a later post).

The issue is not what the proper price for a song is. People have often interpreted the Music Company’s wish for a variable pricing as a way to increase prices/ profits. Variable pricing means that some prices would fall, some would stay the same, and probably very few would rise.

Their concern is that when everything is the same price, it becomes commodity-like. (Now, you don’t need a fucking MBA to know that). So, they hope that while tracks remain on iTunes at 99 cents, tracks with lyrics, tracks with videos and all kinds of additional things should start appearing with upward pricing. There will be experimentation while the price of a single track remains at 99 cents.

For now, prices will remain at 99cents for the big 2006 hit ‘Bad Day’ by Daniel Powter as well as the 1966 classic ‘The Sound of Silence’ by Simon & Garfunkel. Even MC Hammer. Imagine that happening in any other business!!